After a relentless 2022 campaign of interest rate rises, the Reserve Bank of Australia (RBA) added five more increases in 2023, raising the cumulative hip-pocket pain for mortgage holders to 425 basis points. So now, as we get set to embark on 2024, many Aussies are already financially hurting hard, and need to recoup some savings.
On the average $610,000 home loan, borrowers now need to find an extra $1,521 per month than they were paying before rates started rising in May 2022. Monthly repayments have risen to $4,433 from $2,912 in that time (based on the RBA’s so-called discounted average variable rate of 7.31 per cent).
What’s more, that takes the total interest you will pay over 25 years to an eye-watering $719,819, from $263,529.
Nicole has six ways to add $24,000 to your savings in 2024. (Source: Supplied/Getty) ·Samantha Menzies
But the good news is there are six ways to slash the coming year’s costs and even add to your financial stash - to a sweet total $24,000 for 2024.
1. Home loans
Fact sheet
Average home loan: $610,000
RBA average discounted rate: 7.31 per cent
Cheapest, quality loan: 5.69 per cent
Borrowers feel punch drunk by the rate rises but you can get off the ropes with one move – refinancing. Rather than paying that RBA-average $4,433 each month on the typical loan, you could be outlaying just $3,815. That’s an instant saving of $618 a month.
The potential saving is with The Capricornian’s Country to Coast variable-rate home loan, which is the new best-value loan with a real offset account in Mozo’s comparison database (Owner-Occupied, Principal and Interest).
It’s vital to have a loan with a real offset account, not a cheap-and-cheerful one that will ultimately end up costing you more.
Want a bit of added motivation? It’s at a rate of 6.363 per cent that your interest doubles what you paid for your home originally. If you let it.
Average 2024 saving: $7,416
2. Personal loans
Fact sheet
Typical loan: $30,000
Ave rate: 10.58 per cent
Best rate: 5.76 per cent
Like mortgage rates, variable personal loan rates have gone up too. Mozo said you could now be paying an average 10.58 per cent or almost 4 per cent less than that. Harmoney is an online lender that offers applicants with a great credit score rates as low as 5.76 per cent (fixed) – the best in market. How much could this save you?
On the fairly average $30,000 loan, you would pay almost $1,000 a month on the average rate ($976). But move to Harmoney and pay just 5.76 per cent, and your monthly outlay would drop to $909. That’s an extra $67 in your pocket.
Average 2024 saving: $804
3. Health insurance
Fact sheet
Premiums vary widely
Often $2,000 difference between
The health fund premium hikes have only recently hit for many members, as funds seek to cushion the cost impost and keep their customers.
But it’s just possible that a move could prove very lucrative. The difference between comparable quality policies can be as much as $2,000 a year. My top tip is to consider not-for-profit funds.
Many funds today are also rebating in cold, hard cash the equivalent of a month’s premium – or as much as $500 – at the outset of new policies.
And if you are still covered for obstetrics and birth-related services, but are well and truly done with babies, simply turning this off could slash your premium - usually by another $500.
Check by how much your premiums could fall on the excellent privatehealth.gov.au.
Average 2024 saving: $3,000
4. Credit Cards
Fact sheet
Average credit card debt: $2,133
Average rate: 17.11 per cent
Cheapest ongoing rate: 7.49 per cent
32 months available at 0 per cent
While not everyone carries over a credit card debt, about one-third of us do. If this suddenly becomes you, in these tighter times, the average 17.11 per cent interest rate will really cost you.
You could lose $438 in interest just in the next year, if you pay the minimum only. Continue doing that and you will ultimately fork out $5,710 on the average owed - $2,133 - and it will take you 18 years and four months to clear your debt.
Instead, you could switch to the card Mozo says has the lowest ongoing rate, G&C Mutual Bank’s Low Rate Visa Card, at 7.49 per cent.
Better still, transfer your balance to one of the cards from the table below, which offer 0 per cent on your outstanding debt for a period of up to 32 months. It gives you a fantastic window of interest-free opportunity to bust out of debt once and for all.
Savings ideas: 0% credit card balance transfer table
Average 2024 saving: $438
5. Savings accounts
Fact sheet
Possible money in cash: $50,000
Basic rate: 3.55 per cent
Best (non-introductory) rate: 5.7 per cent
Competition has been fierce in this market, as some institutions seek to secure your funds so they can lend them: Move Bank’s Growth Saver is now the new top, according to Mozo, with a possible 5.7 per cent.
Just note this is an incentive-saver style of account, which is popular now. It requires you to clear hurdles each month to get the maximum monthly interest.
If you have $50,000 in the bank (let’s be optimistic!), a smart money move would take your earnings next year to $2,850 from $1,775.
2024 extra interest earned: $1,075
6. Super
Fact sheet
Average 39-year-old super balance: $75,167
Average 10-year, annual return: 6.7 per cent
A poorly performing fund: 0 per cent
A high-performing fund: 15 per cent
The average Aussie has $75,167 in super by age 39, according to the Association of Superannuation Funds of Australia.
This year, SuperRatings estimates the median balanced fund will grow by 8.7 per cent – there was a big bounce back in November and we will shortly know where December’s performance lands us all.
That puts the 10-year return at an average annual rate of 6.7 per cent. But there is often roughly 15 percentage points of difference between the best and worst super performance.
What difference does switching the average balance from the worst to one of the best funds make to your potential 2024 returns? It boosts them by an extraordinary $11,275.
SuperRatings’ top 10 funds are here – just be sure to filter returns over longer terms than just a year, otherwise, you risk picking a fund that’s a ‘one-hit wonder’ and losing your earnings advantage the following year.
